New data from the Australian Bureau of Statistics (ABS) reveals that household wealth in Australia has risen to a record $16.2 trillion in the March 2024 quarter, driven mainly by surging property prices.

The ABS numbers reveal that two-thirds of household wealth ($11.0 trillion) is now held in residential property assets. As a proportion of net household wealth, residential property accounted for around 67.9%, up from 61.7% in December 2020.

Households also held $1.46 trillion directly in equities, $1.73 trillion in cash and deposits, and $3.88 trillion in superannuation.

However, these figures also underline the need for Australians to diversify into other asset classes to reduce financial risk, says Capspace managing director Tim Keith.

“With such a large proportion of individual wealth tied up in property, it makes sense for investors to diversify into other asset classes, to lessen their risk of their wealth falling should residential property prices pull back on higher interest rates and any slowing in the economy,” Keith says.

“While property owners have benefited from property price rises, more defensive assets such as fixed income, and particularly private credit, can deliver more attractive yields than residential property and even fully-franked shares. That’s important because it is income-yielding assets that will support Australians in everyday living and in retirement.”

According to Keith, investment options such as private credit or non-bank loans offer investors a relatively attractive income stream and capital protection through stringent loan process, along with the security taken over borrower assets. Private credit can deliver investors yields close to 10% per annum, which is almost double the typical yields on residential property, which fall below 5%, he says.

“That is one of the main reasons that Australia's largest institutional investors are allocating more to private credit assets. AustralianSuper is one of the largest investors and has allocated over US$4.5 billion (A$7 billion) in private credit globally, with the stated ambition to triple its exposure in the coming years. Overtime, I expect retail investors to follow the lead of Australia's largest superannuation funds given the attractions of this asset class,” Keith says.

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